The current furore surrounding feed-in tariff levels for solar photovoltaic installations has been bought about by the impending depletion of the feed-in tariff budget. The spending envelope the feed-in tariff scheme operates within is a level agreed between Treasury and DECC to help minimise the impact feed-in tariff policies have on bill payers.
According to the Office for National Statistics (ONS) a decision is yet to be made on whether feed-in tariffs are deemed to be imputed ‘tax and spend’ and therefore included within the public finances for National Accounts purposes.
Chris Daffin, a spokesperson for the Office of National Statistics commented on the progress of the decision, stating: “ONS has not yet formally reached a decision on the classification of levy funded schemes such as the feed-in tariff. Given the existence of similar schemes across Europe, a lack of clear international guidance on how such schemes should be treated in the national accounts, and different views across European Statistical Institutes on how such schemes should be treated under international statistical guidance, ONS and HM Treasury have agreed to a moratorium on the classification of these sorts of schemes until a clear international picture is in place.”
In lieu of a decision from ONS, DECC took a view that levy funded schemes (such as the FiT) should be deemed as imputed ‘tax and spend’ and as a result included in the comprehensive Spending Review, which imposed the budget the scheme operates under today.
DECC justified the pre-emptive decision by stating: “Ministers took the view that they needed to make a judgment about where they thought that classification was likely to come out … based on information from decisions that the ONS has already made and its description of the factors that it takes into account in determining whether something counts as tax and spending.”
Daffin continued: “The issue is due to be discussed at the next National Accounts Working Group, in April 2012, though an agreed approach may not be reached at this meeting, in which case the ONS National Accounts Classification Committee may consider the issue of environmental levy schemes in light of the international discussions.”
The German equivalent of the feed-in tariff scheme (a model Barker is keen to emulate) is not included within public spending, a fact that was challenged in the European Court of Justice, who ruled that it did not have to be regarded as subsidy. If the ONS decide not to classify feed-in tariffs within public spending, then it is expected that DECC could allow a loosening of the overall levy spending cap; a move that would allow the scheme to be more flexible and adaptable to major developments in the solar power sector, qualities that would have helped us avoid the current situation the industry finds itself in.